September 2009

September 28, 2009

Michael Gerson, Your Shtetl Pass Is Revoked: On Friday, Gerson -- the Encyclopedia-Britannica-kid of speechwriters-turned-columnists -- wrote a piece denouncing online bigotry. And, you know, sure. Online bigotry is crappy and shouldn't be tolerated. Gerson might have gone a bit over the top in comparing the occasional douche commenter to the Nazis, but his heart was in the right place.

Or so I thought. My friend Ezra Klein wrote a response post respectfully suggesting that Gerson's agita over online incivility might be more appropriately targeted at radio and TV hosts like Rush Limbaugh or Glenn Beck, who possess a significantly greater reach than the asshole writing about Jews in comment threads. And then Gerson went apeshit, writing that Ezra "took a short break from Barack Obama’s unpaid policy staff" to attack him. Yes, this from George Bush's speechwriter, who spent the last two years using the Post's op-ed page to explain why you should look past the dead bodies in New Orleans and Baghdad and see the Christian goodness in Bush's soul. And this from someone complaining about incivility.

Gerson proceeded to huff that Ezra overlooked all the reports raising alarms about online hatred, particularly from Jewish advocacy groups.... But Gerson doesn't stop with that obvious omission. This classless non-Jew, so confident of his own virtue, decides to accuse Ezra Klein of indifference to antisemism.

One part of Klein’s post is particularly illuminating. He finds it amusing to belittle the threat of a hypothetical someone he calls “jewhater429, the 97th entrant in a comment thread” -- just a few months after an Internet-based Jew hater entered the Holocaust Museum with a gun and killed an African-American guard. Some people have the oddest sense of humor.

What the hell, it's almost Yom Kippur, so I can always atone for my tone. But seriously: Michael Gerson needs to shut his f---ing mouth before he ever even thinks accusing a Jew of insufficient vigilance against antisemitism. I don't know what lack of self-awareness convinces right-wing evangelicals that they're the true guardians of the Jews, but that condescending and parochial nonsense is its own form of antisemitism. We Tribesmen do not need some wire-rimmed enabler of one of the most destructive and inept presidents in American history to protect us from the perfidies of the world. It's us and not him who will pay the price for antisemitism, so if Gerson wants to actually act like a righteous gentile, he can start by not accusing Jews of apathy to their own people's wellbeing for the sin of not sharing his politics.

So to conclude: Gerson downplays the worst excesses of right-wing hatred, which displays itself through a more prominent and influential platform than does online hatred of any political coloration; and then he hijacks someone else's religion on a laughably flimsy pretext to defend his blind spots. Good to see, at least, that a Bush administration veteran is at least nondenominational in that approach.

The Valve - A Literary Organ | The Hardest Road to Renewal or, Cultural Studies Now!: Joel Pfister ("The Americanization of Cultural Studies,” Yale Journal of Criticism 4:2 {Spring 1991}).... Pfister actually took a very different view... assessing the conflict between the U.S. scholars and Stuart Hall (who spoke at the conference and pronounced U.S. cultural studiess to be in a “moment of danger") as indicative of the path U.S. scholars had taken toward a “post-political” engagement with popular culture, toward cultural studies as “interpretive performance” rather than critique,” toward an abandonment of history and a reconstitution of “power solely as a problem of ‘textuality.’”...

Foremost, Pfister says, the context of the British Old Left was the starting block for the CCCS, but also its main antagonist: “Hall’s stress on culture grew out of the pressing need to unlearn some of the assumptions, strategies, and goals of the Old Left,” doing so by “recogniz[ing] culture as a productive, determining force in its own right and not merely as a reflection or expression of the economic base” rather than by privileging “members of the working-class as the universal subjects of history” and focusing on the “determinations” of “mechanisms like competition, monopolistic control, and imperial expansion.” Furthermore, the work being produced by CCCS was being disseminated through non- or semi-academic channels (NLR, Marxism Today).... “The New Left’s cultural studies was indivisible from the project of regrouping in response to the predicament of socialism within the crisis of cold war capitalism.” This context simply could not be imported to the U.S. along with the texts (Althusser, Gramsci, et al.) which the CCCS researchers and theorists were using to make their breakthroughs.

Instead, the field of action shrank from society to the academy; rather than social transformation, disciplinary sublation was the goal.... Pfister also questions some of the terms used to describe cultural studies work as already inviting a considerable degree of de-politicization or introversion, and this is probably worth quoting in full:

Words like ‘intervention’ and ‘interrogation’ are meant to signify the cultural studies critic’s serious ‘oppositional’ stance towards hegemonic traditions of knowledge production. These two words carry some obvious militaristic and disciplinary connotations: armies intervene and spies are interrogated; police intervene and suspects are interrogated. ‘Intervention’ and ‘interrogation’ have given critical theorists in US English departments a powerful self-image and sense of mission. Personally, I am delighted that literary critics in both Britain and the US are ‘intervening’ in literary criticism and ‘interrogating’ a canon that have [sic] frequently been misrepresented as having no political agenda. But I am also bothered because this discourse of intervention seems to romanticize the critic’s academic role as sufficiently ‘oppositional’… What is needed in the US now is certainly not a postmodern romanticization of the ‘political-intellectual’ but a greater historical understanding of the social, political, and academic conditions within which a discourse of ‘intervention’ seemed to make sense for those British intellectuals who practiced cultural studies because it was unmistakably one necessary dimension of a larger intervention underway...

The exchange between Bérubé and the UC-Davis students is fairly exemplary.... Bérubé seems to be hoping for a culling or a tightening or focusing of cultural studies onto a few specific (and highly valuable) questions: “complicating the political-economy model in media theory, […] complicating our accounts of neoliberalism, and… convincing people inside and outside the university that cultural studies’ understanding of hegemony is a form of understanding with great explanatory power—that is to say, a form of understanding that actually works.” But while these questions seem to be setting the terms for a definition of what a successful intervention might be, they actually draw back from doing so. The rhetoric he uses of “complicating” is, I think, taking a step back from the more confrontational discourse of “intervention,” as in the end “complicating” terms like ‘neoliberalism’ already understood to be immensely fraught and unstable seems more gestural than substantive—it pushes the focus back onto the object: the participle “complicating” is so blank that we move immediately toward whatever it is we’re supposed to be doing this underdefined action to. And a similar thing happens with the last phrase: “an understanding that actually works” again directs us away from the action and towards what it stands in apposition to—the point is that hegemony is important, not what specifically we’re doing to it.

Similarly, the UC-Davis students interestingly do not read Bérubé’s critique as being one about how they should be going about their work, but as a dismissal of what it is they work on.... ‘No,’ they’re saying, ‘it’s not just Madonna; it’s the war on terror too.’...

Pfister, I think, helps us see that this type of move away from self-critique of methodology toward squabbles over content or subject matter isn’t just about re-focusing on methodology in an abstract manner, but that what is required is a firm historical understanding of methodology, how and why the specific methods of “intervention” or “resistance” are taken up. Without this historical understanding, the discursive formulations we use to describe our methodology ("complicating," “problematizing,” etc.) lose their character as actual maneuvers or strategies and that becomes the type of problem Pfister saw in 1991 and that we can still see quite plainly today.

(1) it developed (and continues to develop) a rich “culture and society” school of criticism, in which the many and various meanings of the first term (from the Arnoldian to the anthropological) are tracked with relation to the contours of the formal and legal apparatus of the latter term. For instance: in 1993, Stuart Hall argued, “far from collapsing the complex questions of cultural identity and issues of social and political rights, what we need now is greater distance between them. We need to be able to insist that rights of citizenship and the incommensurabilities of cultural difference are respected and that the one is not made a condition of the other.” This is not simply a condition-of-England question (as some people have complained about the “culture and society” tradition); it is critical to any attempt to think about hijab-wearing schoolgirls in France or Jehovah’s Witnesses and Christian Scientists refusing medical care for their children in the US. Yes, this school of thought arose out of radical historians’ work on the English working classes, but it didn’t stay there and doesn’t need to. The Empire Strikes Back: Race and Racism in 70s Britain and Paul Gilroy’s There Ain’t No Black in the Union Jack: The Cultural Politics of Race and Nation are responses to (and therefore part of) this tradition, and their revisionary accounts of British identity arguably helped result in the Parekh Report.

(2) it developed (and continues to develop) a rich tradition of analyzing the functions of mass media and mass culture in industrialized democracies. The tradition was kicked off by Hoggart’s The Uses of Literacy and the broadly provocative final chapter of Williams’ Culture and Society, and has gone in, oh, roughly a thousand directions since, mostly in critical dialogue with the tradition of the Frankfurt school and the political economy wing of communications studies. As with (1), there’s a lot of room for maneuver here, and any number of ways to go in the future. But usually, cultural studies sees the “political economy” approach to mass media as Grossberg does—as necessary but finally insufficient for an explanation of how people understand media. As I put it in my post on Manufacturing Consent, sometimes people respond to mass media by saying “this is bullshit,” and writing scathing liberal/left critiques of the mass media; or sometimes people say “this is bullshit” and proceed to blow a lot of Hot Air about how Rachel Ray is sending seekrit terrorist keffiyeh messages with the help of Dunkin Donuts and the librul media. People are funny that way: for a variety of reasons, they sometimes refuse to believe what they’re told.

(3) in the 1970s, it developed New Left-inflected analyses of youth subcultures, “resistance through rituals,” and subcultural formations hovering around things like punk and ska. This is the branch of the field that eventually led to too-celebratory accounts of fandom in the 1990s, and indeed it could be (and has been) argued that it romanticized white working-class boys back in the day. But it served as a necessary rebuke to moral panics about “mugging” in the 1970s, as well as to a persistent kind of leftish moralism that sees only decay and hears only noise when it turns to the passions and pastimes of These Kids Today. And it gave rise to some great, terrain-transforming feminist work on romance novels, slasher movies, soap operas, porn, etc.

(4) out of its work on subcultures, its work on mass media, and its work on culture and society, it developed (and continues, etc.) a Gramscian or neo-Gramscian or post-Gramscian analysis* of the dismantling of the postwar welfare-state consensus, the rise of the new right, and the workings of hegemonic political projects in civil society. The impetus for this school was the rise of Thatcherism in the UK, but, again, it didn’t have to stay there and doesn’t need to. It served as a necessary rebuke to the “body snatchers” theory of the left’s decline, as when Hall wrote, “Of course, there might be an essential Thatcherite subject hiding or concealed in each of us, struggling to get out. But it seems more probable that Thatcherism has been able to constitute new subject positions from which its discourses about the world make sense.” And it also tries to serve—though, as I argued in the Chronicle essay, not with great success so far—as a corrective to the “blame it all on neoliberalism” and “blame it all on false consciousness” tendencies in leftist thought. Additionally, this tradition’s insistence on the diffuseness of “wars of position” enlisted it on the side of the “merely cultural” left in Ye Olde “Two-Lefts” Debate. Again, Hall, from “Gramsci’s Relevance for the Study of Race and Ethnicity”:

The effect [of Gramsci’s work] is to multiply and proliferate the various fronts of politics, and to differentiate the different kinds of social antagonisms. The different fronts of struggle are the various sites of political and social antagonism and constitute the objects of modern politics, when it is understood in the form of a “war of position.” The traditional emphases, in which differentiated types of struggle, for example, around schooling, cultural or sexual politics, institutions of civil society like the family, traditional social organizations, ethnic and cultural institutions and the like, are all subordinated and reduced to an industrial struggle, condensed around the workplace, and a simple choice between trade union and insurrectionary or parliamentary forms of politics, is here systemically challenged and decisively overthrown. The impact on the very conception of politics itself is little short of electrifying.

(5) As the UC Davis letter says, and many many others. You’ve got transnational cultural studies dealing with diaspora and global flows, refugees and immigration; you’ve got cultural studies of science and technology; you’ve got cultural studies of disability and embodiment (hey, I do that stuff!), and so forth. But I think it might be the effort to call these things by (something like) these more specific names, and to try to explain where they do and don’t intersect with the schools of thought sketched out above.

Finally, I think one of the best responses to my argument was one of the first, from way back when I delivered that paper to the Cultural Studies Association this past April: that of my Penn State colleague Jeff Nealon, who said in the Q/A after that panel, and then developed the argument later that night over a couple of beers, that one could argue, contra me, that cultural studies has changed a great deal about the way humanists and social scientists think and work—insofar as nobody goes around anymore proposing to study this one text or that one event in isolation from everything else. Everyone (well, just about everyone) knows that you’re not done with the analysis, you can’t punch out and go home, until you’ve located the text or event or object in some wider network of relations and explained what it’s doing there. (Or to use the proper terms of art, until you’ve located the object or practice in relation to the various cultural formations and historical conjunctures to which it is or has been articulated.) In that sense, Cultural Studies® may have had much less of an impact that people hoped or feared twenty years ago, but a lower-case and amorphous cultural studies has become lingua franca, so to speak, in dozens of fields. I told Jeff at the time that I would still want to show up at a Cultural Studies Association conference panel on “the university after cultural studies” and refuse the invitation to triumphalism. But I think his counterargument has considerable merit, so I’ll close with it, and turn things over to you.

September 26, 2009

Attendant Lords « Trollblog: The discipline of economics provides another striking case of the paradigm-enforcement described by Preston, which is in fact characteristic of much of the modern university. In 1982 Nobelist Wassily Leontieff wrote “The methods used to maintain intellectual discipline in the country’s most influential economics departments can occasionally remind me of those employed by the marines to maintain discipline on Parris Island.” (q. Redman pp. 158-9: compare Putnam’s quote above.) As in philosophy, the training serves to drive out many or most potentially independent thinkers: “By the time that students are a couple of years into their studies, both these questions [about rationality of agents and about the validity of modeling] are forgotten. Those students that remain troubled by them have quit the field; those that remain have been socialized and no longer ask about such things” (John Sutton in Coyle, pp. 249-50). In economics, the dominance of the unnamed old boys network (”more club than profession”, according to Schumpeter: Redman, p. 166) is at least as strangling as in philosophy: “The leading journals are extraordinarily dominant and consequently receive many more submissions than they can publish” (Coyle, p. 250). The power of the old boy networks, in economics as in philosophy, is shown by the fact that their members are never named, not even by their opponents — survival within the profession depends on gaining their approval. Few or none of the critical books I’ve read about philosophy or economics have ever fingered any specific person as an oppressive influence on the profession.

The orthodoxy enforced in economics is methodological — specifically, mathematical modeling. “The reason why many economists think that Galbraith wasn’t one of us lies in his methodology…. many of us spurn Galbraith because he wasn’t a modeler.” (Coyle, p. 231 ) “Our argument is that modern mainstream economics is open to new approaches, as long as they demonstrate a careful understanding of the strengths of the recent orthodox approach and are pursued with a methodology acceptable to the mainstream…..our view is that the elite are relatively open-minded when it comes to new ideas but quite closed-minded when it comes to alternative methodologies. If it isn’t modeled, it isn’t economics, no matter how insightful. “(Rosser, p. 11) “[Mainstream economics'] content is not as focused as mainstream researchers would like, but it is connected by its methodology of technical model building…..Those economists who don’t [do highly technical work] are far less likely to influence the mainstream of the profession directly. They may, however do it indirectly by influencing others who then translate their work into more technical and acceptable methods” (Rosser pp. 17-18).

The economic paradigm is backed by a toxic stew of self-serving positivist philosophy. It began with Milton Friedman’s “Preface to Positive Economics”, which claimed that, since Newton used them, counterfactual presuppositions are perfectly acceptable as long as they lead to predictive theories. This idea was never quite right (Keen, pp. 148-164), but it got worse. Following Lakatos, the profession next rejected the very idea of falsifiability: “Lakatos recommends scientists to select certain of their hypotheses, christen them a ‘hard core’ and decide not to modify or renounce them in the face of empirical difficulties. He tells us little about how such hypotheses are to be selected. As it stands, therefore, his methodology gives carte blanche to any group who want to erect their pet notion into a dogma.” (Redman, pp. 146-7). Finally, it eventually became clear that the predictive powers of economics would always be much less than Friedman had hoped, thus knocking out one of the main legs of his argument and leaving orthodox economics in a dubious position, intellectually speaking, at about the same time when its institutional domination had become almost total.6

The outcome of all this was a hermetically sealed science impervious to the external world (albeit a hermetically-sealed science with enormous worldly power). The presuppositions could be as implausible as the economist wished, the “hard core” was invulnerable to criticism, and no realism was required, as long as the modeling was sophisticated. The profession has a bias against anyone who tries to communicate with a nonspecialist audience (Rosser p. 21; Coyle p. 247) and often ignores economic realities even when they burst into the room: “….the willingness of the mainstream to accept these [new] ideas has varied with time. Sometimes it takes external events for work at the edge to be considered. For example, the more than 20 percent decline of the U.S. stock market on October 19, 1987 for no obvious reason led many economists to be more open to models that allowed such an aberration to occur (the standard models did not)” (Rosser p. 19, my emphasis).

To which I can only ask: Why was it “many” and not “all”? And for an economist, what is “external” about an stock market collapse? Isn’t a stock market collapse a kind of data? Given the feeble response of the economics profession to the 1987 crash, and the 2000 crash, can we hope that economics will learn anything form the most recent crash of our recession-proof economy?7

There are many who believe that economics, despite its self-serving methodological principles, is corrigible. This belief strikes me as wishful: like some of the nobility of the French ancien regime, some of the old boys might be nice people, and selectively open to new ideas if approached deferentially enough, but with economics as with philosophy, we’re dealing with sociology, not ideas. Personal reputations, networks of friendships, career competition, and (in contrast to philosophy) political power and wealth are at stake, and we cannot be sure that the old boys will not succeed in cloning themselves when they die off. (Redman’s book ends on a hopeful note, but twenty years later Coyle, Colander, Holt, and Rosser are still hoping).

The advice Colander, Holt, and Rosser give to economists hoping to do original work tells them how to approach the always-nameless old boy network: “The dynamic approach to change that we are introducing here involves stealth changes….The change, however, is so gradual that the profession often does not notice that it has occurred (Rosser, p. 5) ….Heterodox economists are highly unlikely to get funding through normal channels such as the National Science foundation….(Rosser, p. 9), “Our argument is that modern mainstream economics is open to new approaches, as long as they demonstrate a careful understanding of the strengths of the recent orthodox approach and are pursued with a methodology acceptable to the mainstream…..our view is that the elite are relatively open-minded when it comes to new ideas but quite closed-minded when it comes to alternative methodologies.” (Rosser, p. 11) “Whether that work at the edge is considered heterodox or mainstream is primarily a matter of the individual’s proclivity to fit within the existing mainstream and the degree to which he or she directly attacks rather than softly criticizes…. Working at the edge has its problems, especially for those whose proclivity is toward attacking, rather than working within, the existing field and hence finding themselves in heterodoxy….. economists considered heterodox often find it difficult to gain funding for their work, and they likely will be squeezed out of the decision-making process in their universities”. (Rosser, p. 14)

Even the progress that is made doesn’t filter down; besides being an old-boy network, economics is scholastic. Since the main product of the econ biz is Econ 101 students, this is very significant, or at least it would be if economists cared about the human world. In point of fact, Econ 101 tends to lead beginning students toward a fallacious, antiquated form of free market dogma, and even the reformers don’t expect this to change. “This process from conception of an idea to graduate textbooks can take up to ten years. Intermediate and upper-level graduate textbooks usually take another five to ten years to include the idea…. Principles books take another five to ten years to actually incorporate the idea as a central element….. The more central the idea, the less likely it is to be included in a central way in the texts….. Such major changes are unlikely to show up even with the long lags discussed.” (Rosser, pp. 12-13) “[M]ost of the work discussed in this book has been done by the leading economists, many of them winners of the Nobel memorial prize, and by no means all of this work has reached current textbooks even at the graduate level” (Coyle, p. 5). 8

External Influences

An extensive, well-developed literature on the political factors in the development of the American university exists, and I don’t intend to summarize it. My general conclusion, which I will develop below, is that methodologization, paridigmatization, enforced value neutrality, enforced objectivity, positivism, scientism, etc., have made American scholars, in their depoliticized scholarly work, into passive supporters and advocates of corporate administrative liberalism: politically timid, null, and (above all) reluctant to address the public.

Rightwing McCarthyist attacks on the university are a well-recognized part of this story. From June 22, 1941 to September 2, 1945 the US was allied to the USSR, and some liberals and Democrats also had had friendly relations with Communists during the pre-war New Deal era. When the Truman Administration switched from an anti-fascist crusade in alliance with Communists to an anti-Communist crusade in alliance with fascists (”We have always been at war with Eastasia”), many American liberals found themselves in a delicate situation, and simultaneously, anti-Communist Americans (some of them pre-WWII isolationists) turned mean. The new Democratic anti-Communism turned out not to be vicious enough, and free-lance anti-Communists started attacking the university, where many of the refugee Communists, indigenous Communists, and not-anti-Communist-enough leftists were employed. Almost all university administrations cooperated with the investigations and purges, and while no one was killed and only a few were jailed, a fair number of careers were ended, university radicals were rather quickly silenced, and the university was pacified — remaining hostile to the far right, but unwilling to involve itself in anything leftist. Academics still tended to be Democrats and liberals, but the Democratic Party had lost both its left wing and its populist wing to become a centrist administrative-liberal party.9

There’s also another, much less familiar side to the story, however, as seen in Mirowski and Hargittai, and this side is more important to my argument. During the Roosevelt Administration, and above all during World War II, academic experts and the university did very well for themselves: “Scientists don’t cause war, but war causes scientists”. The university became more closely tied to government than it ever had been before, and government money helped many fields flourish — not just nuclear physics (as told in Hargittai and also Schmitt) but linguistics, foreign languages, anthropology, psychology, economics, and even philosophy and English10. (The pacifist Kenneth Rexroth called this “the gravy train of human blood”). This governmental intrusion in the university was not completely new and was easily justifiable on national defense grounds, and it was welcomed because it brought cash, but along with the money came bureaucratization, hierarchy, and interference from external (non-scientific) players — often military men. Furthermore, a lot of the non-government money going into the university from non-profits such as the Ford Foundation or the Cowles Foundation was driven by wartime needs or other political agendas and came with strings attached. Philosophers and economists with the right style found themselves getting grants and jobs, and philosophers and economists with the wrong style found themselves doing much less well.11

According to Reisch (p 350) Quine, Tarski, Carnap, Davidson, and Reichenbach among the philosophers were all employed at some point by the RAND Corporation, a military consulting group. (Note that this is not a left-right question: during WWII and before McCarthy, radical views were not necessarily a problem — at that time J. Edgar Hoover was looking for Nazis, not Communists). The best description of how the university was penetrated by the state and the military is in Mirowski (2001), who tells how, under the direction of the Cowles Foundation and others, economics was transformed by the combined forces of systems theory, game theory, operations research, strategic planning, and strategically distributed funding to produce a formalistic, disembedded, acultural, psychologically impossible, value-neutral form of mad-dog rationality12.

The story in analytic philosophy is known in less detail, but the outcomes were similar and some of what we know about the processes leading up to them also is similar.13 With the McCarthyist purges of the university, which struck philosophy harder than almost any other department, the political engagement disappeared while the scientistic, formalistic, ethically-neutral aspects remained, and philosophy became dominated by its politically null specializations: metaphysics, philosophy of mind, philosophy of language, analytic ethics (Healy, “Specialization and Status in Philosophy”).

In philosophy, the nullity is the message: analytic philosophy’s role is mostly to pre-empt other forms of philosophy. (By contrast, economics has an actual positive function). Analytic philosophy’s compulsive-obsessive insistence on rigorous argument, combined with its antinomian laxness about hypotheticals and arbitrary methodological stipulations, unsuit it for participation in persuasive, “normative” and constructive discourse. As Inwagen says (The Problem of Evil, Oxford, 2006, p. 55), analytic argument never convinces anyone — indeed, analytic philosophy has renounced persuasion, which is intrinsic to political and ethical discourse, and basically wants every debate to last forever. Bertrand Russell’s solution (which disgusted Wittgenstein) was to divide his work into unphilosophical political journalism and apolitical philosophy, and given the analytic methodology he had helped create, he really had no other choice.14

September 25, 2009

Uncertainty and climate change — Crooked Timber: I was at a conference on uncertainty and climate change in Berkeley last week, and gave the wrap-up panel discussion with Geoffrey Heal. We’d discussed a wide range of uncertainties and ambiguities, from future emissions scenarios to model uncertainty to perception and communication issues, and we were asked to comment on how, with so much uncertainty, economists can make useful recommendations.

Before I give the answer I came up with, a few side issues

First, as I mentioned briefly, while everyone at this workshop and many others were working on ways to reduce, manage and understand uncertainty, there is also a large and (at least until recently) very well-funded group working, to create and disseminate uncertainty, ignorance and confusion, with sufficient success that much of the political right in Australia and nearly all in the US have been (with their own complicity) deluded into thinking the problem is illusory.

Second, it’s a straightforward implication of standard economic analysis that the more uncertainty is the rate of climate change the stronger is the optimal policy response. That’s because, in the economic jargon, the damage function is convex. To explain this, think about the central IPCC projection of a 3.5 degrees increase in global mean temperature, which would imply significant but moderate economic damage (maybe a long-run loss of 5-10 per cent of GDP, depending on how you value ecosystem effects). In the most optimistic case, that might be totally wrong – there might be no warming and no damage. But precisely because this is a central projection it implies an equal probability that the warming will be 7 degrees, which would be utterly catastrophic. So, a calculation that takes account of uncertainty implies greater expected losses from inaction and therefore a stronger case for action. This is partly offset by the fact that we will learn more over time, so an optimal plan may involve an initial period where the reduction in emissions is slower, but there is an investment in capacity to reduce emissions quickly if the news is bad. This is why its important to get an emissions trading scheme in place, with details that can be adjusted later, rather than to argue too much about getting the short term parts of the policy exactly right.

A third point, raised by Michael Hanemann is that the global average conceals a lot of seasonal and regional variation. He suggested IIRC that on current estimates, a 3.5 degree global average increase corresponds to an 8 degree increase in winter temperatures in Southern California, with huge implications for water supplies derived from snowfall.

Anyway, back to my main point. The huge scientific uncertainty about the cost of inaction has obscured a surprisingly strong economic consensus about the economic cost of stabilising global CO2 concentrations at the levels currently being debated by national governments, that is, in the range 450-550 ppm. The typical estimate of costs is 2 per cent of global income, plus or minus 2 per cent. There are no credible estimates above 5 per cent, and I don’t think any serious economist believes in a value below zero (that is, a claim that we could eliminate most CO2 emissions using only ‘no regrets’ policies).

For anyone who, like me, is confident that the expected costs of doing nothing about emissions, relative to stabilisation, are well above 5 per cent of global income that makes the basic choice an easy one. Any agreement that comes out of Copenhagen or its successors will be better than no agreement.

A slightly trickier question is: what is the best target? I don’t have a good answer to this, but, given the politics of the process I don’t need one. The nature of such negotiations, with every country looking to shift as much of the cost as possible to others, ensures that there is almost no likelihood of getting an agreement that is too strong. In the present case, we can put some numbers on this. On the same kind of reasoning as I gave above, it seems clear enough that a 450 ppm target would be beneficial relative to a 550 ppm target. And, given the commitments and offers already on the table, the likelihood of anything stronger than 450 ppm is close to zero.

So, despite all the uncertainties, the policy position I would like to see Australia take to Copenhagen is clear enough. Aim for an agreement on a 450 ppm target, with emissions cuts on track for this until 2020 and with the capacity to revise later when we have more information. With all its imperfections, the currently proposed ETS (including a 25 per cent cut in emissions as part of a global agreement) is consistent with this position and therefore should be supported unless and until something better can be put in its place.

The Punchbags Of Notre Dame — Crooked Timber: Do you find yourself considering the financial crisis and thinking “well, neoclassical economists have certainly come through this one with their reputations enhanced! Anyone with a world-class heterodox economics department should certainly be thinking about closing it down right now, there’s no interest in that sort of thing!”. Well, if you do, then you’re almost certainly working as an administrator at Notre Dame University (or for that matter, the University of Notre Dame, thanks Ben in comments), because nobody else does.

I mean, what the byOurLady heck do they think they are playing at. Back in April 2008, the decision to place clear fresh water between the nice professional efficient market types in the “Economics and Econometrics” department, and the dirty f**king hippies in “Economics and Policy Analysis” might have made some sort of sense, in that while cynical and not very academic-freedom-y, it would have improved students’ chances of getting into prestigious economics graduate programs where they could write “counterintuitive” and “fascinating” job market papers about penalty shootouts and speed-dating (these being the only remaining social or anthropological questions not thoroughly answered by neoclassical economists, cf “Freakonomics”).

But today? With the whole field blown wide open and all sorts of questions of the role of economic analysis wide open to debate again? With Richard Freaking Posner coming out as a post-Keynesian? I suppose that if you truly believe that it’s impossible to time the market, this is one way to prove it.

Economics of Contempt: Memories (Casey Mulligan edition): Remember this NYT op-ed by the University of Chicago's Casey Mulligan last October? Well, as bad as it was then, it's even worse now. (Keep in mind that this is a full professor of economics in the #1 ranked economics department in the country):

The non-financial sectors of our economy will not suffer much from even a prolonged banking crisis, because the general economic importance of banks has been highly exaggerated.

...

Although banks perform an essential economic function — bringing together investors and savers — they are not the only institutions that can do this. Pension funds, university endowments, venture capitalists and corporations all bring money to new investment projects without banks playing any essential role. [ed: Wow. Just wow. I didn't think it was possible to be a professional economist and also not understand a single thing about how a financial market works. Apparently I was wrong.]

What’s more, it’s not as if banking services are about to vanish. When a bank or a group of banks go under, the economywide demand for their services creates a strong profit motive for new banks to enter the marketplace and for existing banks to expand their operations. (Bank of America and J. P. Morgan Chase are already doing this.)

...

And if it takes a while for banks and lenders to get up and running again, what’s the big deal? Saving and investment are themselves not essential to the economy in the short term. Businesses could postpone their investments for a few quarters with a fairly small effect on Americans’ living standards. How harmful would it be to wait nine more months for a new car or an addition to your house?

Perhaps the most interesting part of the book [Tyler Cowen's "Good and Plenty"] is one that goes on a tangent from Cowen’s main argument – his discussion of how changes in the ability of producers to enforce copyright are likely to affect cultural production. Here, he argues that the likely consequences will differ dramatically from art form to art form. Simplifying a little, he adapts Walter Benjamin to argue that there is likely to be a big difference between art forms that rely heavily on their “aura,” and art forms that can be transformed into information without losing much of their cultural content. The former are likely to continue to do well – they aren’t fundamentally challenged by the Internet. In contrast, forms of art which can be translated into information without losing much of their content are likely to see substantial changes, thanks to competition from file sharing services. Over time, we may see “the symbolic and informational” functions of art [becoming] increasingly separate,” as the Internet offers pure information, and other outlets invest more heavily in providing an “aura” and accompanying benefits of status that will make consumers more willing to pay for art (because it is being produced in a prestigious concert hall, exhibited in a museum etc).

I think this is a very nice insight that is likely to prove true. It's not always so easy to determine what kinds of what forms of expression fall into which category, however. I believe that many newspaper producers long believed that the "aura" of reading the newspaper—having the physical item in one's hands—was an important part of news consumption. This may have been true to some extent, but the advantages of information digitisation overwhelmed the aura, with obvious consequences.

Where else might we apply this framework? Ezra Klein links today to Kevin Carey, who writes:

In recent years, Americans have grown accustomed to living amid the smoking wreckage of various once-proud industries — automakers bankrupt, brand-name Wall Street banks in ruins, newspapers dying by the dozen. It’s tempting in such circumstances to take comfort in the seeming permanency of our colleges and universities, in the notion that our world-beating higher education system will reliably produce research and knowledge workers for decades to come. But this is an illusion. Colleges are caught in the same kind of debt-fueled price spiral that just blew up the real estate market. They’re also in the information business in a time when technology is driving down the cost of selling information to record, destabilizing lows.

In combination, these two trends threaten to shake the foundation of the modern university, in much the same way that other seemingly impregnable institutions have been torn apart. In some ways, the upheaval will be a welcome one. Students will benefit enormously from radically lower prices — particularly people like [online student Barbara] Solvig who lack disposable income and need higher learning to compete in an ever-more treacherous economy. But these huge changes will also seriously threaten the ability of universities to provide all the things beyond teaching on which society depends: science, culture, the transmission of our civilization from one generation to the next.

There is no question that much of what counts as the educational part of college is digitisable and nearly endlessly duplicable. Texts and papers fall into this category, as do lectures and demonstrations. In the past, the economics of universities were based on provision of these things; books and experts were scarce, and so it made sense to gather students in one place, in proximity to those things, in order to learn from them. If this is all that underpins the modern institute of higher education, then it is only a matter of time until it vanishes.

But it may be the case that aura is more important than pieces of information where colleges are concerned. It could be that the key value is in being in a room with an expert and other interested students, in participating in dorm-room bull sessions, in napping on a pile of texts in a musty old library, and in running naked across the quad at three in the morning. These things can't be digitised and infinitely replicated. If the primary benefit from a university education is to be found somewhere in that aura, then many colleges will do just fine.

In fact, there are aspects of both that are important, in different contexts and to different students (and employers). Potentially, things could go either way for institutes of higher education. Of course, there are powerful lobbies waiting to do what's necessary to support the traditional university. Among them are alumni, who cherish their college experience and who control hiring practices, for the most part. There are university employees, who are often wealthy and influential. And there are television stations who make millions of dollars off of collegiate athletics. These groups may be every bit as committed to maintaining the status quo as have been record labels in the music industry, and more effective.

One other thing to think about; it could be that a key value of universities has nothing at all to do with what a student does while enrolled, and instead stems from the filtering mechanism of the admissions process. College degrees may be useful because the admissions department has done the difficult background work of identifying promising candidates for employment. They act as ratings agencies, in a sense, screening products and declaring them "safe" or "risky". It would be interesting if in the future there are organisations which play this role more explicitly, offering to investigate a candidate's history and skillset for a fee, and certifying qualified candidates, all in a fraction of the time and at a fraction of the cost of an actual university education.

But one way or another, the digital and internet revolution should ultimately reveal just what everyone is paying for when they write that tuition cheque.

September 23, 2009

FT.com / Columnists / Martin Wolf - Why China must do more to rebalance its economy: China has had a good crisis. That became obvious at the “summer Davos” of the World Economic Forum, in Dalian, less than two weeks ago. Chinese confidence was palpable. But so was anxiety. The giant has survived the shock. But its recovery is driven by a surge in credit and fixed investment. In the longer term, China needs to rebalance its economy, by increasing consumption. It is time for the Chinese to enjoy themselves more. How unpleasant can that be?

The man who best captured both the confidence and the uncertainty was premier Wen Jiabao. He told the meeting that “the unprecedented global financial crisis has taken a heavy toll on the Chinese economy. Yet we have risen up to challenges and dealt with the difficulties with full confidence”. But he also admitted that the “stabilisation and recovery of the Chinese economy are not yet steady, solid and balanced”.

The data coming out of China suggest a powerful recovery is indeed under way. In the first half of the year, noted the premier, gross domestic product expanded 7.1 per cent. The September consensus forecasts suggest that the Chinese economy will expand 8.3 per cent in 2009 and 9.4 per cent in 2010. The Asian giant is expected to become the world’s second largest economy in 2010, even at market prices.

According to the Economist Intelligence Unit, domestic demand may expand by as much as 11.5 per cent in real terms this year. Such a surge in Chinese internal demand is exactly what was needed. Chinese household consumption is also forecast to grow 9.3 per cent (see chart). Yet, as usual, real fixed investment is the locomotive. It is forecast to grow 14.8 per cent this year. If so, it would have grown faster than GDP in all but one of the past 10 years. This rising ratio of investment to GDP, from an already high level, is not a strength but a weakness. It suggests declining returns on capital. It risks creating ever-rising excess capacity. Moreover, when growth rates finally fall, the collapse in investment is going to knock a huge hole in demand.

The heavy reliance on investment is not the only risk ahead. So, too, is the surge in credit and money (see chart). Many believe this is bound to lead to another upswing in bad debt and destabilising asset bubbles. The jump in the ratio of broad money to GDP is also worrying, coming after a long period of stability.

China, it appears, has saved itself. Has it also been saving the world?

The most encouraging development is the shrinkage of China’s current account and trade surpluses (see chart). Both exports and imports have fallen sharply, but exports have fallen further. Yet China’s trade has been so volatile (along with everybody else’s) that it is hard to be sure this will prove a turning point. Much will depend on the nature and pace of the global recovery. Moreover, the country will continue to run a substantial current account surplus and accumulate still more foreign currency reserves, even though they are already far larger than China needs for insurance purposes. After all, they reached $2,132bn (over 40 per cent of GDP) in June of this year.

That would be equivalent to official holdings by the US government of $6,000bn (€4,000bn, £3,670bn) all denominated in the currencies of other countries. It is little wonder such a huge exposure makes the Chinese government nervous. But nobody asked the Chinese to do this. On the contrary, US policymakers have consistently (and wisely) advised them to do the opposite. Having made what I believe was a huge mistake, the Chinese government cannot expect anybody to save them from its consequences.

A substantial appreciation of the Chinese currency is inevitable and desirable in the years ahead. The longer the Chinese authorities fight it, the bigger their losses (and the pain of adjustment) are going to be. What they have to do is cut those losses, by ceasing to accumulate yet more reserves. As Morris Goldstein and Nicholas Lardy of the Peterson Institute for International Economics argue, in an excellent recent study, the policies required to do this are also needed to help rebalance the economy in the long term.*

It is important to understand how distorted China’s economy now is: in 2007, personal consumption was just 35 per cent of GDP. Meanwhile, China was investing 11 per cent of GDP in low-yielding foreign assets, via its current account surplus. Remember how poor hundreds of millions of Chinese still are. Then consider that the net transfer of resources abroad was equal to a third of personal consumption.

This is surely indefensible. The premier may even agree. In Dalian, Mr Wen remarked that “we should focus on restructuring the economy, and make greater effort to enhance the role of domestic demand, especially final consumption, in spurring growth”. An appreciation of the real exchange rate, ideally via a rise in the nominal exchange rate, would help. Not the least of the distortions of the current regime is the need to keep interest rates low, to curb capital inflows. This shifts massive amounts of income from households into corporate profits.

Whether China’s partners will raise the issue of exchange rate policy in Pittsburgh, at the summit of the G20, is, alas, unclear. The Chinese are probably powerful enough to prevent it. But President Hu Jintao will surely complain about US protectionism. I sympathise with him. I would sympathise far more, however, if China’s foreign currency interventions, combined with the sterilisation of their natural monetary effects, was not such a massive subsidy to its exports.

The big point for China is that, like it or not – and it is perfectly clear to even the casual visitor that many Chinese dislike it intensely – the explosive rise in trade and current account surpluses of the mid-2000s is an unrepeatable event.

The short-term rebalancing of this year, via a huge credit expansion and surge in fixed investment, is a temporary expedient. It must lead to a rebalancing of the Chinese economy towards consumption. This is in China’s interests. It is also in the interests of a better balanced world economy. If the successful response of this year leads in this direction, the crisis will have brought great long-term benefit.

“A crisis,” as they like to say in Washington these days, “is a terrible thing to waste.” They may be ungrammatical. But they are right – and not only for the US.

The freshwater backlash (boring) - Paul Krugman Blog - NYTimes.com: I have my problems with New Keynesian analysis, but surely it demonstrated that Keynesian insights had something to them. When it comes to the current debate, the key thing is surely that New Keynesian models do, in fact, show that fiscal policy can raise output and create jobs.

That’s why the debate over fiscal policy has been such a revelation. It’s perfectly OK to question the desirability of a fiscal stimulus, or challenge the specifics of the Obama plan. But no macroeconomist who has been paying attention for the past 20+ years would assert that fiscal policy is useless as a matter of principle.

Yet that, of course, is exactly what the freshwater types asserted en masse — along with claims that nobody, or anyway nobody at a quality economics department, believes that fiscal policy can do any good. Sneers take the place of actually engaging the argument.

Brad DeLong does a yeoman job of collecting the fallacies. As he says, they show famous economists making sophomore-level errors, again and again. They also show that the Chicago School has spent the past generation looking entirely inward — paying no attention to ideas and research elsewhere. Basically, their worldview has been frozen in amber since around 1978.

And that, in turn, explains the sheer rage over my article. It was actually written in a fairly cool tone — but it did say that the emperor had no clothes, that people who have been posing as the sole guardians of sophisticated macroeconomics have, in fact, been revealed as being remarkably ignorant. Fury was the inevitable reaction.

Again, read those quotations Brad has collected. These are the reactions of people who just can’t accept that they might have missed something — having been caught out in elementary errors, their reaction is to try even more sneers and putdowns, in an attempt to retain their sense of superiority.

Reference Section

From Brad DeLong

J. Bradford DeLong, Professor of Economics at U.C Berkeley, a Research Associate of the NBER, a Visiting Scholar at the Federal Reserve Bank of San Francisco, and Chair of Berkeley's Political Economy major.

The Eighteen-Year-Old is going to college next year, which means that I need to think about making more money. (The idea that one might write checks to rather than receive checks from universities is now strange to me.) So I have signed up with the Leigh Speakers' Bureau which also handles, among many others: Chris Anderson; Suzanne Berger; Michael Boskin; Kenneth Courtis; Clive Crook; Bill Emmott; Robert H. Frank; William Goetzmann; Douglas J. Holtz-Eakin; Paul Krugman; Bill McKibben; Paul Romer; Jeffrey Sachs; Robert Shiller;James Surowiecki; Martin Wolf; Adrian Wooldridge.

About Brad DeLong

Leigh Speakers' Bureau

The Eighteen-Year-Old is going to college, which means that I need to think about making more money. (The idea that one might write checks to rather than receive checks from universities still seems very strange to me.) So I have signed up with the Leigh Speakers' Bureau which also handles, among many others: Chris Anderson; Suzanne Berger; Michael Boskin; Kenneth Courtis; Clive Crook; Bill Emmott; Robert H. Frank; William Goetzmann; Douglas J. Holtz-Eakin; Paul Krugman; Bill McKibben; Paul Romer; Jeffrey Sachs; Robert Shiller;James Surowiecki; Martin Wolf; Adrian Wooldridge.

J. Bradford DeLong is a professor of economics at the University of California at Berkeley, chair of its political economy major, a research associate of the National Bureau of Economic Research, a visiting scholar at the Federal Reserve Bank of San Francisco, and was in the Clinton administration a deputy assistant secretary of the U.S. Treasury.
His best work extends from business cycle dynamics through economic growth, behavioral finance, political economy, economic history, international finance to the history of economic thought and other topics.